The government has today (25 September) launched a consultation on extending the new legislation on the London interbank offered rate to cover further benchmarks in the foreign exchange, fixed income and commodity markets.
In June the government established the Fair and Effective Markets Review, bringing the Treasury, the Bank of England and the Financial Conduct Authority together to look at the way wholesale financial markets operate.
While the review will publish its final report in June 2015, the chancellor confirmed at the time that the government will extend the Libor legislation to cover further financial benchmarks, based on an early recommendation.
These review recommendations have now been submitted to the Treasury and published alongside the consultation. The government has proposed extending the legislation to the following seven major benchmarks:
• Sterling Overnight Index Average (Sonia) and the Repurchase Overnight Index Average (Ronia), which both serve as reference rates for overnight index swaps;
• WM/Reuters 4pm London Fix, which is the dominant global foreign exchange benchmark;
• ISDAFix, which is the principal global benchmark for swap rates and spreads for interest rate swap transactions;
• London Gold Fixing and the LMBA Silver Price, which determine the price of gold and silver in the London market; and
• ICE Brent futures contract, traded on the ICE Futures Europe (IFEU) exchange, which acts as the crude oil futures market’s principal financial benchmark
Andrea Leadsom, economic secretary to the Treasury, said: “Ensuring that the key rates that underpin financial markets are robust, and that anyone who seeks to manipulate them is subject to the full force of the law is vital.
“That’s why the government is determined to deal with abuses, tackle the unacceptable behaviour of the few and ensure that markets are fair for the many who depend on them.”
The Treasury intends to have the new regime for designated benchmarks in place by the end of the year, and will continue to engage in ongoing international discussions on improving the integrity of all benchmarks.
The consultation will run to 23 October and the government will hold targeted industry roundtables with affected parties.
